Covid-19 Response and Recovery Review – Co-Funded Payroll Scheme Report (S.R.9/2022): response of the Minister for Treasury and Resources

Findings

Comments

1

The  Co-Funded  Payroll  Scheme  was established  to  support  the  Island's businesses to maintain employment in order to mitigate the impact of COVID- 19 restrictions.

The objectives of the Co-Funded Payroll Scheme (CFPS) were as follows:

• ensure businesses can survive the pandemic: enable  as  many  businesses  as  possible  to survive the immediate crisis so they are in a position to resume trading so supply capacity remains intact

• maintain employment: ensure employment remains as close to pre-pandemic levels as possible

• support Islanders' incomes: ensure workers continue to benefit from a reasonable level of income to avoid hardship during the pandemic and preserve demand to support an economic recovery once social distancing and Stay at Home restrictions are lifted; and

• support a robust economic recovery: enable nominal Gross Value Added (GVA) in each of Jersey's  sectors  to  return  to  pre-pandemic (2019) levels by 2022 at the latest.

As  the  Comptroller  and  Auditor  General  has indicated in her report on the Scheme, we are pleased that the CFPS appears to have met its objectives.

2

No right of appeal to decisions made in relation  to  the  Co-Funded  Payroll Scheme  applications  was  given, however, reviews were undertaken in some cases.

Islanders had recourse at all times by contacting CLS  officials  managing  the  Scheme  and ultimately  the  Minister  for  Treasury  and Resources  should  there  be  issues  that  would necessitate potential changes to the rules of the Scheme or judgements made by officials. This process allows for issues to be resolved without a need for a formal appeals process, which can often be time consuming.

It is worth noting that a formal appeals process would be unlikely to change the repayments that must be made for the self-employed, who are the primary focus of the Panel's report. The audit testing for the self-employed relies on a simple comparison of two different sets of data and does not require judgement on the part of the auditors. While a small number of repayment requirements have been revised down, so far all of those have been the result of the claimant realising that they had made an error on their tax declaration, which,

Findings

Comments

after  correction,  reduced  or  eliminated  the disparity  with  the  income  declared  for  CFPS purposes.

3

The Co-Funded Payroll Scheme criteria was updated throughout the pandemic, with guidelines to the criteria and the application process also being refined over the time period.

The Report narrative that supports this finding entirely  inaccurately  declares  issues  in  the guidance were not rectified in a timely manner'.

No issues in the guidance' have been identified nor are requirements for repayment a result of any inadequacies in the Scheme guidance.

The CFPS evolved over time to reflect changes in economic  conditions  and  public  health restrictions. Changes were principally related to the level of subsidy paid by the Scheme and the range of sectors that qualified for support. The revised  guidance  for  the  Scheme  was  always published prior to any new phases of the Scheme being introduced.

No changes were made to the qualifying income criteria that are the reason that most have to repay funding. People who have to make repayments typically declared a higher income on their CFPS claim than they did for tax purposes. The Scheme criteria relating to income that was supported did not change so the requirement to make repayment was not a result of changes in the Scheme.

4

Repayment  requests  have  been  made against  subsidised  payments  in  the majority of phases of the Co-Funded Payroll Scheme.

None.

5

The Government of Jersey made efforts to make the guidelines to criteria and application to the Co-Funded Payroll Scheme understandable, however, this was not achieved in all cases.

We  welcome  the  Panel's  recognition  of  the significant efforts that were made to ensure that the  guidance  and  detailed  Frequently  Asked Questions  (FAQs)  document  could  be  readily understood by applicants.

The guidance and FAQs for the CFPS were clear about how people's income should be calculated. We  consulted  with  a  variety  of  business representative groups at the start of the Scheme to refine  the  documents  so  that  they  could  be understood by businesses. Customer and Local

Findings

Comments

Services  (CLS)  provided a helpline to support Islanders who were making claims to the Scheme and were unsure as to how they should make a claim. The Government also provided additional funding to Jersey Business, which supports SMEs, to run an advisory service, which included support for small businesses that were making claims to the CFPS and other business support schemes. We therefore made extensive efforts to ensure that the rules of the scheme could be readily understood and applied by businesses.

The Panel's report makes assertions that it states have  not  been  verified.  We  are  satisfied  that Government did everything it could in the context of an emergency response to ensure the guidance provided was clear about how claims should be made.  

6

Auditing of payments made under the Co-Funded  Payroll  Scheme  were undertaken by both Customer and Local Services  and  an  external  auditor. External audit on Phase 7 of the scheme is outstanding, with internal work on earlier phases continuing which could have implication for claims.

None.

7

Delays to auditing of the Co-Funded Payroll  Scheme  payments,  of  over  a year,  made  requests  for  repayment unexpected  to  some.  Repayment  of these  debts  may  contribute to  severe financial  pressure  faced  by  some Islanders.

There was no delay to the audit process. The audit process  commenced  August  2020  as  the  audit adopted a risk-based approach that focused on the highest value claims made by large businesses.

The Government has been clear at all times that while it is incumbent on Ministers to ensure that public  funds  are  safeguarded,  the  repayment process  should  not  cause  financial  hardship. Extended  repayment  terms  have  been  made available. All claimants can take up to 2 years to repay with terms of up to 5 years provided on a case-by-case basis where appropriate.

The  CFPS  paid  one  of  the  highest  levels  of subsidy  of  any  wage-subsidy  scheme implemented  during  the  pandemic,  which  was effective in mitigating the economic impact of Covid-19. People who have to repay the funding they  overclaimed,  still  get  to  keep  all  of  the

Findings

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support they were entitled to and we do not accept that  the  requirement  to  make  repayments  is placing claimants under severe financial pressure.

8

Audits  of  the  Co-Funded  Payroll Scheme  payments  undertaken  by Government have compared the figures provided  during  application  to  those held by other government departments. Audited  information  by  Government appears  to  have  been  incorrectly interpreted or lacked reasoning in some cases.

This finding relates to the fact that the majority of people who have to repay some of the funding, declared a higher income when applying for CFPS subsidy than was declared on their tax return.

Many  of  these  people  have  claimed  for  their business  income  rather  than  their  personal income, and therefore, received a subsidy that was often  higher  than  the  amount  of  money  they usually  make  from  their  business  in  normal economic  conditions.  Others  have  included income that is not related to the self-employment that the Scheme was there to protect such as rental income, investment income, or their income from an unrelated job. These other sources of income were  not  eligible  for  support  and  were  often unaffected by the pandemic. When taking account of  the  CFPS  subsidy,  claimants  would  have received a high level of income than they did before the pandemic.

While the overwhelming majority of overclaims are  likely  the  result  of  honest  mistakes,  it  is absolutely not the case that these issues are the result of Government incorrectly interpreting the rules  of  the  Scheme  or  making  decisions  that lacked reasoning.

The report refers to 172 that have indicated they intend  to  provide  further  evidence  as  to  the accuracy of their CFPS claim. It suggests that they are  challenging  the  guidance  provided  by  the Scheme.  In  fact,  they  have  indicated  their intention  to  review  and  update  their  tax declaration.

9

The Government of Jersey undertook to individually  contact  each  business facing  a  Co-Funded  Payroll  Scheme repayment demand; however, this may

The process of making contact with individuals is still  underway  but  has  been  successful  where carried out.

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not  have  always  been  successfully carried out.

10

Members of the public did not receive a personalised  contact  to  query  Co- Funded  Payroll  Scheme  repayment demands.

The  overwhelming  majority  of  people  were contacted by telephone, whereupon the advisor would introduce themselves and the reason for the call, a very small minority who were unable to be contacted  by  telephone  received  an  email notification.

While a generic email address is used to allow for seamless communications when individual staff members  are  unavailable  or  out  of  the  office, emails sent are still signed off with the customer service adviser's first name. The use of a first name  means  that  customers  retain  access  to  a named person in what is a very small team.

11

Delays in correspondence regarding the Co-Funded Payroll Scheme repayment demands have at times caused undue stress for businesses/individuals.

We are very conscious that business owners have been under acute pressure during the pandemic, and  we  have  put  in  place  additional  customer service steps when notifying people of the need to make a repayment including initially contacting people with a personal telephone call. There is no easy  way  to  communicate  what  is  inevitably unwelcome  news, but we feel that appropriate steps have been taken to ensure this is done with sensitivity.

Correspondence with customers has been timely in the overwhelming majority of cases. As the report notes, it would be rare for correspondence to take place over extended timeframes, but in some cases there may be legitimate reasons why responses are provided some time after a previous contact.

12

Communications in relation to the Co- Funded  Payroll  Scheme  repayment demands undertaken by Customer and Local  Services  have  left  some individuals  feeling  persecuted  and unduly accused.

The  customer  service  team  have  been  very balanced and factual, at no time has there been an instance  where  the  staff  have  acted  in  an accusatory manner. As would be expected of a high-performing  customer  service  organisation No evidence has been presented to demonstrate that CLS staff have not at all times treated each customer respectfully.

Findings

Comments

13

The  Government  of  Jersey  did  not widely  communicate  extensions  to payment  plan  timetables  to  those affected by Co-Funded Payroll Scheme repayment demands.

The extension  of  repayment  arrangements  was announced  through  the  media  and  Jersey Business,  which  supports  SMEs  was  also informed, so it was widely communicated. The same channels were used to promote the change in repayment timescales as were used to announce the launch and extension of the Scheme itself. They  were  effective  in  that  setting  so  it  was reasonable  to  rely  on  the  same  approach  for communicating  the  change  to  repayment timescales. To ensure that all claimants are aware of  the  repayment  terms  available,  CLS  has subsequently contacted all individuals that have yet  to  agree  a  mutually  convenient  repayment plan.

14

It has been indicated that there is no right of appeal to a decision to reclaim monies distributed via the Co-Funded Payroll Scheme, however, it has been highlighted individuals can write to the Minister for Treasury and Resources to request a review of these decisions.

None.

15

Co-Funded Payroll Scheme repayment demands have at times been reduced or removed.

This has been the case where the claimants have corrected their tax declaration. This brought their tax affairs closer into line with the income they declared  for  CFPS  and  thereby  reduced  or eliminated any requirement required.

16

The  Minister  for  Treasury  and Resources has refused to acknowledge any confusion caused by the guidelines to criteria and application to the Co- Funded Payroll Scheme issued by the Government of Jersey.

The Minister recognised in writing to the CSSP that, despite Government's extensive efforts to ensure that guidelines could be understood by the public,  it  was  clear  some  people  had misinterpreted them.

17

The  Minister  for  Treasury  and Resources  has  made  a  number  of extensions  to  payment  deadlines following  correspondence  from  the Panel, allowing at least 2 years and up to 5 years to pay back overpayment.

There was only a single decision to extend the length of repayment plans that would be agreed.

Recommendations

To

Accept/ Reject

Comments

Target date of action/

completion

1

The Minister for Treasury and  Resources  should provide all of those who faced or continue to face an overpayment demand, a  right  to  appeal.  This should  be  formally announced  by  10  May 2022, with guidance to an appeal  process  to  be published in due course.

MT R

REJECT

Formal appeal processes are often time- consuming,  bureaucratic  mechanisms that are not appropriate for a Scheme on the scale of the CFPS, which received over 27,000 individual claims.

Islanders had recourse at all times by contacting CLS officials managing the Scheme and ultimately the Minister for Treasury and Resources should there be issues that would necessitate potential changes to the rules of the Scheme or judgements  made  by  officials.  This process allows for the same benefit of an appeals process but it able to operate in a leaner way. In many cases it will also have allowed for more timely responses to made.

N/A

2

The Minister for Treasury and  Resources  must  in future include a right to appeal of decisions made on  applications  to business  support schemes.  The  appeal policy and process should be  clearly  outlined  and communicated  at  the commencement  of  a business support scheme to  applicants.  The outcome of any reviewed appeals  to  a  business support scheme must be reported to the Assembly by  the  Minister  for Treasury  and  Resources within six months of the final  payments  to  a business support scheme.

MT R

REJECT

As it did when creating the CFPS, the Government  of  Jersey  will  consider whether  a  formal  appeals  process  is appropriate  for  any  new  scheme. However, for the reasons outlined above it was not an appropriate mechanism for the CFPS and the Government will not be bound by a requirement to introduce formal  appeals  process  for  every Scheme.

N/A

Recommendations

To

Accept/ Reject

Comments

Target date of action/

completion

3

The Minister for Treasury and  Resources  must ensure that guidelines to criteria and application to any  future  business support  schemes  are tested  with  a  greater selection  of  users  to ensure full understanding of the application process and  in  order  to  identify any issues such as those seen  in  definition  of "Gross  Income"  during the  Co-Funded  Payroll Scheme.

MT R

REJECT

As set out above, extensive efforts were made  to  ensure  that  the  rules  of  the Scheme  could  be  understood  by members of the public. This work was done under acute time pressure given the urgent  need  to  provide  support  to businesses  while  the  Stay-at-Home Order was in place. I am satisfied that the  Government  did  everything  it reasonably could in the context.

In future, we would make similar efforts, but  anything  we  do  will  always  be imperfect  and  some  people  will  not understand  or  chose  not  to  read  the guidance  provided  despite  our  best endeavours.

N/A

4

The Minister for Treasury and  Resources  should ensure  in  future  that auditing  is  carried  out within  three  months  for any support schemes, to avoid unexpected claims being  brought  against applicants at a much later date  when  they  are unaware that the monies received  were  being reconsidered.

MT R

REJECT

The primarily focus of the Panel's report is  the  audit  of  the  self-employed.  It would have been impossible to conduct the  audit  of  self-employed  workers within three months as the necessary tax data  used  as  a  comparison  for  self- employed people would not have been available. The first claims for the CFPS were  made  during  April  2020,  the deadline for making tax declarations did not pass until July 2020. The resulting tax  assessments  were  not  finally completed until the end of 2020.

The CFPS audit was conducted on the basis of risk. The high value claims from large businesses were audited first and the  audit  of  the  self-employed  was rightly conducted later in the risk-based audit programme.

All future audits should be conducted on the  basis  of  the  right  risk-focused judgements and not arbitrary timescales.

N/A

Recommendations

To

Accept/ Reject

Comments

Target date of action/

completion

5

The Minister for Treasury and  Resources  must ensure that the extension of payment terms of live debts for business support schemes  are  directly communicated  to  those individuals or businesses involved as well as to the wider  Accounting  or Business  Support community  and  the Assembly.

MT R

REJECT

No  action  arises  from  this recommendation  as  this  has  already been  undertaken  as  the  Panel  was informed. Individuals who had initially been given 12 months to repay have all been contacted via telephone to advise of the extension in time to repay.

N/A

6

The Minister for Treasury and  Resources  must ensure  that  cases  are reviewed  individually when  common  issues arise during auditing of a business support scheme, with  a  common-sense approach  being  adopted to ensure that those who provided  information  in good faith are not unduly penalised.

MT R

REJECT

No  action  arises  from  this recommendation as this has always been the approach that has been adopted by the Scheme.

N/A